Phase Two Consultation

[The Solar King]

Ted

It doesn't alter the outcome. The ROI calculation in PVsol uses the time value of money to produce an NPV using a DCF method. Householders understand the comparison with bank interest or bonds and even shares. In all cases, they have their capital (hopefully) intact at the end of the investment period. As stated unless they bank payments and savings in fuel cost the capital sum is liquidated as it has been taken as income and savings.

This doesn't effect whether or not the proposals in phase two are viable or not.

I am not going to join the orchestra on the Titanic and fiddle away as the ship sinks. I want to stay in this business. I want to provide customers with what they want. I want the Government to provide a framework that allows me to do so and prosper.

Whether or not DECC take panel degradation into account or not is likely to affect the outcome of the big picture. Where it may come into play is if we could get to a position of an agreed formula over digression based on factual information and not some consultants report cobbled together from meagre unsubstantiated data in less than two weeks.

All this means finding ways of putting more money in to the FITs budget.

 

[Gavin A]

Sorry, but all this is simply rearranging deckchairs on the Titanic.

No it's not.

If the government isn't basing the figures used in the consultation on the evidence it states it is using in the way that it states it is using it then this would make the consultation inherently flawed and could be used as evidence for a legal challenge if needed if the government relied on these figures to justify a bigger than acceptable FIT reduction.

Alternatively, if spotted and pointed out clearly enough at the consultation stage by enough people, it's possible the government will see sense and head off any court challenge by amending their rates accordingly.

Once Seb has got back to me I will let you know the basis of the figures given.

no need to do this on my behalf, I've eventually sussed them out.

They're figures for the low cost scenario for the estimate from the end of 2012 and end of 2013.

Basically what I'm saying is that if you're going to argue against the figures, it strengthens your case a lot if you know exactly how they're come up with the figures, and if there are signficant flaws in that methodology that you can point to as evidence of why their figures are unrealistic.

Otherwise they'll simply state that they've taken independent advice on the figures etc etc and ignore us all again (may still happen, but it makes it a lot riskier for them to do so).

 

[The Solar King]

Gavin

This is OK but largely semantics.

What are you going to do about it?

The whole point of what I am saying is we ALL need to to respond. Respond on the basis of whatever data you wish to use but please respond.
Understand that the only way we can move forward is with more money in the budget.
Current policy is likely to continually pull installations forward due to rushes to meet real or false deadlines making the possibility of a much lower FIT all the more likely.

Until I hear back neither of us know whether or not you have sussed it out as you make the assumption the figures I quoted originate from the document you have used and are being used in the manner you think they are being used. Semantics again. Without substantiation we are no better than DECC.

 

[The Solar King]

Gavin

Having spoken to Seb, you are right in your analysis. The problem is DECC are using the low cost scenario as the basis of their deliberations.

I have major problems with the use of ROI for domestic customers. In general they are not familiar with the concept. They need an understandable comparison with domestic savings products. 5% ROI is not the same as 5% bank interest. ROI is completely right for commercial installations.

In a written reply to a question in Parliament it was admitted that the Parsons Brinckerhoff document is based on data from only 11 companies. This makes it totally suspect from the point of view of statistical accuracy.

Without empirical data, we are stuffed if DECC continue to use this report.

My own analysis starting at the micro level suggests that a 4kW system needs Feed-In Tariff support for considerably less than 20 years if we can continue at 21p plus 1.5p export.

Going back to my original post, without collection of empirical data on which to base decision making this consultation will not provide a satisfactory outcome.

From an up to 4kW standpoint this is what I would want from this consultation:
Increase in Export tariff to 9p for new installations with Feed in tariff reduced pro-rata to retain 22.5p total
Feed In Tariff of 18p until April 2013
Reduction in Tariff period to 20 Years
Collection of cost data via registration of systems on MCS database.

Offer to existing FITs participants to swap FITs payments for export payments as set out in original post to free up additional budget.

Use of time between now and April 2013 to develop a stable and equitable FIts system based on empirical data. Use this time frame to develop a system that adequately supports larger systems, that can be attractive to investors to attract the necessary capital.

I haven't got the macro figures but am hopeful this would reduce the required budget sufficiently to allow the industry to move forward and meet Mr Barker's 22gW target.

Again, it is really important we all respond to this consultation and let our MPs know of the threat it poses to our jobs and the industry.

 

[moggy1968]

In order to be able to provide payments based on exports you need meters cabable of measuring export, which at present the vast majority of installations don't have.
Mr Barkers 22GW target wouldn't have been achieved even at 43.3p based on the number of installations completed so far so how this is expected to be achieved by making PV less attractive to customers is beyond me, oh, actually, I know, by supporting large scale solar installations provided by the big 6 energy companies which brings us back to

err

Barker isn't interested in Small Scale Energy Production
Barker is in the pockets of the big 6

The Government doesn't want SSEG and they aren't really interested in arguments to support SSEG. The only arguments they are interested in is ones that support the ending of SSEG and a move to centralised energy production. The fact that those arguments may be fundamentally flawed (or downright lies) is irrelevant to them.

 

[The Solar King]

Tend to agree with you moggy

In my first post, suggested introduction of Export meters for existing customers at reasonable cost (not an obstructive one). Last post is still based on deeming at 50%.

I think Barker is a bit of an enigma as to where he really stands on SSEG and solar. Within the big picture, the lack of a cohesive Energy Policy within the UK does not help. There are a lot of competing pressures and the invidious influence of the big 6 with their embedded presence in DECC is detrimental to anything that is not in their interests. We do face a problem of what appears to be a lack of political will to deal with the big 6. They threaten energy shortages at every turn if they do not get their own way. I believe the time will come when people will view the scandal of what is happening in DECC in the same light as phone hacking/News of The World/Rupert Murdoch and undue political influence. However, by the time everyone is saying I told you so, it will be too late for us.

We need to continue to make as much noise as we can and create as much political discomfort as possible. This is what has got us the meagre scraps we have left in FITs. If you believe in the industry and want it to have a future, we have to fight on, what ever the odds.

 

[Gavin A]

Gavin

Having spoken to Seb, you are right in your analysis. The problem is DECC are using the low cost scenario as the basis of their deliberations.

Thanks, but having worked through the entire consultation document and supporting documents I don't think that's really an accurate statement.

All the reductions in FIT rates are based on the mid range scenario of prices, which to me seem relatively realistic.

These have been modelled on central assumptions about cost reductions over
the next three years

The point Seb was making about the lower cost scenario figures related purely to Barker's pronouncements about the number of installations, and industry jobs that were still expected after the cuts. Seb was correctly pointing out that these figures were taken from the analysis of likely uptake under the low cost scenario only, and that the minister ought to be using the medium cost scenario figures when making such statements as the low cost scenario is unlikely to be realistic.

So Barker was wrong to be spouting the predicted figures in the way that he was, but these aren't the figures they'd used to base their actual cuts on, so it'd be counter productive to focus too much on these figures in any response to the consultation IMO.


For reference purposes, the medium cost scenario predicted figures for a 2kWp installation are as follows

£6,333 Jan 2012
£5,001 End 2012 (21% reduction)
£4,369 End 2013 (12.6% reduction)
£3,989 End 2014 (8.7% reduction)
£3,751 End 2015 (6.0% reduction)

I don't have a crystal ball for prices several years ahead, but we're already offering the end 2012 prices for 2kWp systems on our cheaper range, and I don't see these figures as being completely unrealistic, at least nowhere near as much as the low cost scenario figures.

The low cost scenario figures however are a complete fantasy.

 

[The Solar King]

Problem is if £5100.00 is the price used (and I'll assume it excludes VAT), the tariff rate is critical. At 16.5p +1.5p export, payback based on 35% self use of electricity, 3% inflation and 5% electricity price inflation, is in the order of 23 years using NPV with a return of 5%. If you zero inflation rates, it may only just break even in the life of the equipment. Neither of these is a proposition attractive enough for a customer to purchase. This is based on SAP 2005 irradiance and an unshaded south facing roof. The only way people will buy is through ignorance or mis-selling.

At 21.0p + 1.5p export it breaks even in around 18 years.

There are a lot of variables come in to play with regard to viability. eg overall consumption in the property and load profile - this affects the percentage of own use of power, and more importantly geographic location. A FIT system designed for unshaded south facing roofs in the home counties is f-all use.

It comes back to the political will to have a viable system with proper recognition of the contribution PV can make to energy provision and recognition of the economic contribution the industry makes. Whilst not being very optimistic of this there is opportunity if we take it. If we take our feet off their necks for one second we are dead.

 

[moggy1968]

'I think Barker is a bit of an enigma as to where he really stands on SSEG and solar.'
Thats because he lacks the information, knowledge and intelligence to process the data he is fed.